API opposes bailout of FirstEnergy Solutions, asks Trump administration to 'let the markets work'

  • The American Petroleum Institute joined the queue of entities opposed to bailing out FirstEnergy Solutions, a struggling coal and nuclear utility.
  • The company has announced plans to shutter 3 plants, and has filed for bankruptcy protection.
  • The API has applauded the rise of natural gas, which has hurt FirstEnergy's business, and called on the Trump administration to "let markets work."

Signage is displayed at the FirstEnergy Corp. Bruce Mansfield coal-fired power plant in Shippingport, Pennsylvania.
Justin Merriman | Bloomberg | Getty Images
Signage is displayed at the FirstEnergy Corp. Bruce Mansfield coal-fired power plant in Shippingport, Pennsylvania.

It's not often environmentalists and the oil industry find themselves on the same side of an argument, but FirstEnergy Solutions' plea for emergency government assistance has united some unlikely bedfellows.

The American Petroleum Institute, the oil and gas industry association, released a letter calling for the Trump Administration to "let markets work" by denying the struggling utility firm's request for a government rescue. A bailout of FirstEnergy Solutions, which earlier this month filed for bankruptcy protection, is also opposed by a majority of power plant owners and environmental groups.

Last month, the company — a unit of FirstEnergy Corp — announced plans to shutter 3 nuclear plants, which according to FirstEnergy Solutions generates over 4 billlion watts of energy, and affects 65 million customers. FirstEnergy said it would shut several nuclear plants in Ohio and Pennsylvania in the next three years without some kind of state or federal relief.

Citing a "serious threat to the stability" of the U.S. electricity grid, FirstEnergy called on Energy Secretary Rick Perry to use Section 202c of the Federal Power Act to help stabilize its business. Like most utilities that use coal and nuclear power generators, FirstEnergy has been walloped by natural gas, which is cheaper and more environmentally friendly.

For that reason, the API said that granting FirstEnergy's request "would be at odds with your stated goals of energy dominance, economic growth, and improving America's infrastructure," the organization wrote to the Energy Department, in a filing made public on Friday.

"The natural gas industry and the shale revolution are poster children for 'letting the markets work,' the API argued in its filing, citing the U.S. shale boom as "a prime example of competition at work….This would not have been possible without the competition that was enabled by regulators having the courage to 'let the market work.'"

The API's opposition puts it firmly in the camp of conservationists – most of whom are averse to nuclear and coal energy — that have also spoken out against FirstEnergy's request. The Sierra Club has spoken out in opposition to FirstEnergy's rescue, and even threatened to sue the Energy Department if it grants the request.

The coal industry has furiously lobbied President Donald Trump to help keep unprofitable coal producers solvent, an idea to which the president has lent a sympathetic ear. Currently, the Energy Department is weighing a rescue of FirstEnergy Solutions, but has yet to decide on whether to grant it.

Perry, who was asked about FirstEnergy's request just last week, was noncommittal in his response. He said he had a "responsibility to make sure that when the demand is there for this country…we have power. And I would suggest to you the way to guarantee that as best we can is to have as diverse a port of energy moving to the grid as we can."

Natural gas – one of the primary exponents of the U.S. shale revolution – has slowly overtaken coal as the main source of generating electricity, according to the Energy Information Administration, reflecting the increasingly diverse energy mix of the world's largest economy.

For its part, the API "supports an 'all of the above' approach to America's power generation fuel mix," the organization said in its letter.

"Natural gas and natural gas generation provide both performance and cost attributes that contribute to the reliability and resilience of the electric grid and allowing a range of fuels to compete in the market will ensure the best outcome for American families and businesses, both in cost and reliability," the API added.

--CNBC's Tom DiChristopher and Reuters contributed to this report.